New Jersey Governor Signs New Budget Law
New Jersey Governor, Chris Christie, used his line item veto power and signed the new budget into law on June 30, 2011. By signing the new budget, the government avoided a last minute shutdown.
In addition to increases to school districts and funding for hospitals, the bill focuses on tax cuts and building the economy. The key tax provisions for tax years beginning on or after January 1, 2012, include the following:
- A 25% reduction in the New Jersey Subchapter S corporation minimum tax. The minimum tax rates will vary from $375 for gross receipts less than $100,000 to $1,500 for gross receipts of $1 million or more. The annual minimum tax for New Jersey Subchapter S corporation members of affiliated or controlled groups with total payroll of $5 million or more will continue to be $2,000.
- Elimination of the 50% of tax liability limitation for the corporate income tax research credit. The research credit is still limited to expenditures made in New Jersey, and the computation is unchanged other than to remove the 50% cap. The impact of this favorable change will allow greater utilization of the New Jersey research credit. New Jersey S corporations can offset entity level tax with this credit, but are not permitted to pass the credit to shareholders.
- Increase in the Homestead Benefit Program for residents with less than $150,000 gross income who are 65 years of age or older or are blind or disabled (the previous gross income limit was $100,000). The benefit is 5% of the first $10,000 of property taxes paid.
- Increase in the Homestead Benefit Program for residents with less than $75,000 gross income who are less than 65 years of age. (The previous gross income limit was $50,000.) The benefit is maxed out at 10% of the first $10,000 of property taxes paid and is subject to gross income limitations.
- No increase in the tax rate for individuals and businesses with gross income exceeding $1 million as had been proposed in the original budget.
Some of the more unpopular provisions of the new budget include reductions to state student aid (TAG), the state Earned Income Tax Credit, NJ Family Care and a cut of legal services to the poor.
Recently, local state senators have announced that the Senate will meet to determine a re-vote on the line item vetoes. Should there be any further adjustments to the budget, Marcum LLP will keep you up to date on any changes.
A copy of the completed budget can be located at: http://www.state.nj.us/treasury/omb/publications/12budget/pdf/appendix.pdf
Should you have any questions on how this budget may affect you or your business, please contact your Marcum SALT professional with any questions.